UPDATE 2-Belgium sees 09 budget balance, eyes energy sector

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By Antonia van de Velde

BRUSSELS, Oct 14 (Reuters) - The Belgian government plans to balance its budget in 2009 and will introduce measures to promote competition and lower prices in the energy sector, Prime Minister Yves Leterme told parliament on Tuesday.

The government had previously been targeting a surplus of 0.3 percent of gross domestic product next year, but it revised this because of the financial crisis and economic slowdown.

"Growth is receding, companies are announcing drastic restructurings, people are threatened with losing their jobs, purchasing power is coming under more pressure. Government finances are also feeling a negative impact," Leterme said.

He added that growth prospects for 2009 had halved.

The Federal Planning Bureau, Belgium's economic forecasting agency, said a month ago that it saw the Belgian economy expanding by 1.2 percent in 2009, down from a previous forecast of 1.7 percent.

Since then, the financial crisis has forced the government to bail out two of the top three banks, Fortis (FOR.BR) and Dexia (DEXI.BR), and said it will guarantee interbank loans for all Belgian banks in an effort to thaw frozen credit markets.

"The federal planning bureau is now forecasting 1.2 percent and some international institutions even anticipate that growth will grind to a halt next year," Leterme said.

The Belgian premier said he understood the concerns of households whose purchasing power has been eroded by inflation that peaked at 5.9 percent in July.

Soaring inflation has raised concerns over the Belgian system of index-linked wage increases, but Leterme defended it.

"In the context of high inflation, wage moderation is essential," Leterme said.

"In other countries without automatic indexation, wages are adjusted to inflation as well, but in a less gradual and more abrupt manner," he said.

Belgium is one of only two EU countries with indexation of wages and social benefits.

In his speech, Leterme announced a series of measures, including curbs in income tax and increases for pensions.

He also said the government wanted to promote more competition in the energy sector. Electrabel, the Belgian electricity arm of GDF Suez (GSZ.PA), dominates the country's electricity market.